August was a bad month for innovation.
If that wasn’t enough -- the CEO and driving force behind one of the most innovative companies in history resigned.
Perhaps the Steve Jobs resignation couldn’t have come at a better time for our industry. It should be a wake-up call for the rest of the technology industry. Steve Jobs is synonymous with innovation, and his legacy is marked with unbridled success. His focus on reinventing existing markets and creating new markets has led to some of the most significant developments in the history of personal computing.
Sadly -- during a time when our industry should be celebrating innovation -- we instead have been left with an alarming juxtaposition of an innovative leader in Jobs, and HP giving up on the most promising and innovative technologies in their portfolio for the sake of building out an old-fashioned enterprise software business.
HP is reaching deep down into enterprise software’s oldest bag of tricks, snapping up a large software vendor and buying their way into an IT business with cash and business maneuvers.
Acquisitions, vendor lock-in strategies and monolithic information technology is NOT innovation. While this industry desperately needs to shift the focus back to innovation, many of our peers are content to buy, sell and market their way to profits, without ever giving a moment’s notice to the effect such behavior has on our reputation as an innovative industry, as leaders, and as a major contributor in the global economy.
This is Bad for the Buy-Side
It’s a vicious cycle.
Autonomy was founded on great innovation, and the company exploded in value during the dot-com boom as UK investors bought in on the promise of the “British Google.”
However, innovation is very hard, and Autonomy found that in order to feed investors’ quarterly appetite, they needed to deliver regular topline growth. So the company embarked on a dizzying spree of acquisitions to bulk up revenues. Their “dot com” proceeds gave them lots of firepower to acquire. Autonomy rapidly moved to become the CA of content management, buying established companies with limited prospects and integrating disparate technologies with the Autonomy Idol “marketecture.” These offerings could now be cross-sold by a rapacious sales force to a locked-in customer base.
And that’s how Autonomy became the company it is today. Amazingly, the cycle is repeating itself once again -- and it’s reminiscent of nesting dolls, each jar consuming its smaller counterpart, until you’re left with just one, massive, extremely dense entity.
HP will now acquire Autonomy to form, what they hope to be, the next powerhouse vendor in enterprise software.
But it’s not going to be that easy. HP’s investment in Autonomy indicates that it has no intentions to innovate in the upstream IT market. They’re buying their way in, and they’re buying companies that have a long history of growing by tactical tricks that lock their customers into cross-sell and up-sell situations.
The market wants something different and customers deserve better. This is precisely the type of behavior that fueled the rise of open-source alternatives in virtually every major enterprise software category.
So What Exactly is the Monolithic Vendor Playbook?
The quick way to make money in IT is to buy a company that has a large, established customer base, and then use them to sell complementary products that you either own already, or plan to acquire in subsequent deals.
Basically -- once you have them sold on the proprietary platform -- you can force them to buy everything else that sits on it or adjacent to it. This works particularly well if you ensure that your platform doesn’t play nice with other vendors’ technology.
At that point, you’ve reduced the business strategy down to sales and marketing. And it’s no surprise that the average software company spends roughly 20-50 percent of the revenues on sales and marketing.
This approach is not true of every software company…but it’s the “status quo” that has kept buy-side advocates like Dennis Howlett, Ray Wang and Vinnie Mirchandani busy for the better part of the last few decades.
The mere fact that Ray Wang had to develop a “Software Buyer’s Bill of Rights” should be proof enough that our industry hasn’t been on its best behavior.